By Maria Saporta and Dave Williams
As published in the Atlanta Business Chronicle on January 8, 2016
A $9 million payment the city of Atlanta made to Atlanta Public Schools late last month is raising legal questions.
The Atlanta City Council voted last summer to pay the school system $4 million as a good-faith commitment toward resolving a dispute over property taxes generated within the Atlanta Beltline.
City Attorney Cathy Hampton announced Jan. 4 that the city paid APS another $5 million in late December. That second payment was made without the council’s knowledge or input, Councilwoman Felicia Moore said.
“If it is done properly with legal authority, it would have been an ordinance, a piece of legislation that would be publicly vetted and approved, that would state where the money was coming from,” Moore said.
“The executive branch, the CFO, the COO, none of them have the authority for paying $5 million. … You can’t write a $5 million check without the authorization of city council.”
But Hampton said the city has unilateral legal authority to make the payments under the terms of a 2009 amendment to a 2005 agreement between the city, APS and Invest Atlanta — the city’s economic development agency. Both the 2005 and 2009 documents were approved by the city council.
“The $9 million payment demonstrates the city’s commitment to finalizing a resolution as quickly as possible,” Hampton said Jan. 6. “We remain cautiously optimistic that settlement will be reached very soon.”
In the 2005 intergovernmental agreement, the two parties entered into a contract spelling out how the Beltline would be funded. APS agreed to give up some of its property tax dollars generated by redevelopment along the Beltline corridor. To offset the loss, the city promised to make fixed annual payments to APS.
The amended agreement approved in 2009 set the city’s total payment to the school system at $162 million, broken down into yearly installments through 2030.
But those payments were interrupted when the Great Recession dampened real estate values. While APS officials insisted on their money, Mayor Kasim Reed argued new economic realities not foreseen before the downturn meant the contract needed restructuring.
The dispute has dragged on for two years, but recent signs have pointed toward a potential settlement.
The city council met in closed session on Jan. 4, while Atlanta Board of Education Chairman Courtney English waited at City Hall, anticipating an agreement might be struck.
“I feel good about our ability to get a deal done that works for the city, the Beltline and, most importantly, our children,” English said at the time.
While council members took no action after emerging from the session, council President Ceasar Mitchell sounded an optimistic note at the end of the council meeting.
“I think progress is being made, and the parties are working in good faith,” he said.
Moore said she is glad the city appears close to reaching a resolution with APS. But she wanted to know where the additional $5 million payment was coming from – whether it came out of the city’s general fund budget rather than from taxes generated by the Beltline improvements, as stipulated in the agreement.
The flap has caused tension between the city and APS, preventing other collaborations. It’s not known whether a new deal would address the sale of school-owned properties. But it would be seen as removing a major impediment that caused a rift between Reed and APS leaders.